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Clampdown on aggressive tax schemes should boost VCT demand

15 July 2014

Bestinvest survey finds two-thirds of VCT groups expect fund raising in 2014/15 to be higher than previous year

A survey of VCT management groups by Bestinvest has found that 67% expect fund raising this year to surpass the £393 million raised in VCT new offers in the 2013/14 tax year, despite the fact the previous tax year saw a multi-year record for new fund raising. Among groups who responded to the Bestinvest survey, representing most VCT managers, all but one stated it was “highly likely” they will conduct additional fund raising this tax year.

Commenting on the findings, Jason Hollands, Managing Director of Bestinvest, said: “After a strong period for fund raising in 2013/14, views are generally quite bullish about the current tax year, though ultimately we believe that much will depend on what level of new cash the bigger players decide to go for, bearing in mind the significant scale of last year’s fund raising activity.

“VCTs are incredibly mindful of the need not to raise more cash that they are comfortable they are able to invest, as the rules require at least 70% of their portfolios must be invested in qualifying investments within three years to avoid jeopardising their VCT status. Generally upbeat forecasts on the size of the market suggest new deal pipelines remain strong as small enterprises seek development capital.

“From the perspective of investor demand, we see the VCT market as underpinned by the hunt for income and the reduced annual and lifetime pension allowances which came into effect this year impacting more affluent investors. Yields on mature VCTs are very high compared to most other asset classes, and importantly they are tax free which makes them potentially very attractive for higher and additional rate taxpayers who understand the risks of investing in less liquid investments.

“With HMRC continuing to show its determination to crack down on aggressive tax mitigation strategies, with expectations that it will today publish a list of 1,200 schemes whose members will be told to repay tax within 90 days, we expect that VCTs as a legitimate, government backed tax efficient investment scheme will be a beneficiary as investors shun dubious, loophole driven schemes.”

- ENDS -

Important information:

VCTs should be regarded as higher risk investments. They are only suitable for UK resident taxpayers who can tolerate higher risk and have a time horizon of greater than five years. Past performance is not an indication of future performance. Share values and income from them may go down as well as up and you may not get back the amount originally invested. Owing to the nature of their underlying assets, VCT's are highly illiquid. Investors should be aware that they may have difficulty, or be unable to realise their shares at levels close to that that reflect the value of the underlying assets. Tax levels and reliefs may change and the availability of tax reliefs will depend on individual circumstances. You should only subscribe for new VCT shares on the basis of the relevant prospectus and must carefully consider the risk warnings contained in that prospectus.

Founded in 1986, Bestinvest has grown to become a leading private client investment adviser, looking after £5 billion of assets. We offer a range of investment services from the Online Investment Service for self-directed investors to Investment Advisory and Investment Management services for clients who do not have the time or inclination to manage their own investments.

All of our services are underpinned by rigorous research aimed at identifying those fund managers we believe will deliver long-term superior performance. We also have a team of expert financial planners with nationwide coverage to help clients with their pensions, retirement or Inheritance Tax planning. At Bestinvest, we pride ourselves on offering the highest levels of professionalism and expertise with transparent, competitive prices. We are pleased that our greatest source of new business is from personal referrals from existing clients.

Bestinvest has won numerous awards including Stockbroker of the Year, Low-Cost Sipp Provider of the Year and Self-Select ISA Provider of the Year at The Investors Chronicle and Financial Times Investment Awards 2013. Bestinvest also won UK Wealth Manager of the Year 2013 and Best Wealth Manager for Investments at The Investors Chronicle and the Financial Times Wealth Management Awards 2013.

Headquartered in Mayfair, London, Bestinvest employs more than 200 staff and has an extensive network of regional offices. For further information, please visit: www.bestinvest.co.uk

About Tilney

Tilney is a leading investment and financial planning group that builds on a heritage of more than 180 years. Our clients are private investors, charities and professional intermediaries who trust us with over £23 billion of their assets. We offer a range of services including financial planning, investment management and advice and, through our Bestinvest service, a leading online platform for those who prefer to manage their own investments.

We have won numerous awards. Tilney has been awarded Best Conventional Advisory Service at the 2018 City of London Wealth Management Awards, Best Advisory Service in the 2015 City of London Wealth Management Awards; Investment Award – Cautious category in the Private Asset Management Awards; and Stockbroker of the Year, Execution-only Stockbroker of the Year and Self-select ISA Provider of the Year 2015, as voted by readers of the Financial Times and Investors Chronicle. Bestinvest was voted Best SIPP Provider and Best Fund Platform at the 2017 City of London Wealth Management Awards, Best Direct SIPP Provider at the YourMoney.com Awards 2017, Best Stocks & Shares ISA Provider at the 2017 Shares Awards, as well as Best Self Select ISA Provider, Best Online/Execution-only Stockbroker and Best Investment Platform 2017 at the FT and Investors Chronicle Investment and Wealth Management Awards, as voted by readers of the FT and Investors Chronicle.

Headquartered in Mayfair, London, the Tilney Group employs over 1,000 staff across our network of 30 offices, enabling us to support clients with a local service throughout the UK.

Jason Hollands

Katy Moore

The value of your investment can go down as well as up, and you can get back less than you originally invested.

Past performance or any yields quoted should not be considered reliable indicators of future returns. Restricted advice can be provided as part of other services offered by Tilney Group, upon request and on a fee basis. Before investing in funds please check the specific risk factors on the key features document or refer to our risk warning notice as some funds can be high risk or complex; they may also have risks relating to the geographical area, industry sector and/or underlying assets in which they invest. Prevailing tax rates and relief are dependent on your individual circumstances and are subject to change.

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